‘The idea of what TV is will change’ – the challenges and opportunities of addressable TV

Seven premiered a new form of advertising in Australia late last year during the Rugby League World Cup. But with viewers increasingly turning to streaming, what are the pitfalls broadcasters face, and why has the industry been slow to invest in video ad serving platforms?

On June 9, 2008, Steve Jobs unveiled his second iPhone, the “3G”, at Apple’s Worldwide Developers’ Conference in San Francisco.

When the 53-year-old walked onto the stage, he was, predictably, cheered like a rockstar by the 5,000-capacity Moscone Center. Yet, at the time, the presentation also felt like something of a damp squib.

The 3G was always going to be music-tech giant’s difficult second album after its debut changed everything with the touch of a screen in 2007. Its new features merely reminding customers of the basic functionality omitted from the original in its giddy rush to market. It’s hard to imagine today, but the first iPhone shipped without GPS, downloadable apps or even copy and paste.

Yet there was one moment that, in hindsight, seems significant.

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To demonstrate 3G’s potential, Jobs introduced a video on the big screen showing the new phone loading a web page on both the old and next-generation networks, at the same time, side by side.

“It’s a website with lots of images on it,” he emphasised. “And a complex layout.”

By the time they had both finished huffing and puffing, the old connection recorded a pitiful time of 59 seconds, while 3G mustered a not-much-better 21 seconds.

“So then we took two other state-of-the-art 3G phones. The iPhone 3G is 36% faster than the Nokia N96 or Treo 750.”

Then he made his point.

“And you get a full website on the iPhone’s screen and something… quite a bit less on these other two.”

The iPhone 3G became the first device that made mobile internet a reality because, as Jobs explained, it combined a screen big enough to watch video on with a connection quick enough that it worked. It made the 2007 original look like an MP3 player with a phone lumped in. Or as The Sydney Morning Herald put it the following morning: “It’s more of a work horse and less of a show pony.”

Over the next decade, marketers and media companies would struggle to come to terms with the changes that single technological leap made to consumer behaviour.

The dawn of the age of ‘total video’

Fast forward to 2018 and total video streaming, both on mobile and a smart TV at home, has not just revolutionised how we consume video but opened up a world of possibilities for how marketers can target customers – if they can overcome a number of barriers.

Seven became the first major Australian network to offer addressable advertising to viewers streaming their content live or via catch up. This potentially means not only can different ads be shown depending on the composition of the household, but that multiple versions of ads can be made to suit the user.

“Brands can target three or four different demographics for the same product,” explains Allen Klosowski, from video ad serving platform SpotX. “If it’s a car advert, why not focus on its easy access to the back seat if the viewer has kids?”

It also presents the possibility of interaction with live events, too. Seven began offering the service in October 2017, beginning with the Rugby League World Cup. Its first clients included big-hitters such as McDonald’s, Telstra and Coles and early iterations of its software allow the channel to target audiences by behaviour, location, age and gender.

However, these events also present potential problems that new platforms need to be able to overcome. “If somebody hits a red button on a sporting event the ads have to be ready to go,” Klosowski says.

“That means a brand is connected to thousands of buyers and we work with our partners to make sure the ad decisions are made before the break. Then we can do some cool stuff like vary the length of the break or change the ad. You could have different advertising if the pause was caused by a penalty kick.”

Addressable TV’s push into the mainstream is a result of the changing viewing habits that broadcasters can no longer afford to ignore. Today, more than half of all video viewing is happening on phones. Since 2013, mobile video views have tripled. And, crucially, it’s not just short clips of skateboarding cats and the like – 48% of all video viewing on smartphones relates to footage that’s five minutes or longer, and 30% that lasts 20-minutes plus.

In the living room, it’s a similar story: programs can pile on huge amounts of extra viewers after the initial linear broadcast. Across catch-up, Aussies are streaming between 40 and 50 million minutes of TV a day via services such as Plus7, 9Now and Tenplay.

“At first younger demographics were more likely to watch on a connected device but it’s starting to filter into an older demographic,” says Doug Peiffer, CEO of TV ratings measurement service OzTAM, who compile TV data.

“The number of devices is growing, and that’s causing a fragmentation of viewing. People move around, too. You might watch some of The Bachelorette on the TV that night but continue the next day on your phone.” People, he says, are personalising their viewing time.

The increased numbers are mostly because almost any screen can be used to watch video – whether or not it was internet enabled out of the box. Total video can now be watched through a smart TV or an ordinary TV turned “connected” via a digital TV box, games console or USB dongle. Meanwhile, the breathless list of providers includes SVOD subscription services on demand (Stan, Netflix, Quickflix); TVOD paid-for one-off downloads (iTunes, Google Play); AVOD ad-funded catch-up from traditional services (Plus 7, 9Now, Tenplay) and peer-to-peer (YouTube, Daily Motion); as well as hybrid offerings by satellite TV companies.

Flexibility for content creators

It’s already changing how broadcasters are commissioning their content. In February 2016, for example, BBC Three in the UK became the first high-profile TV station in the world to go streaming only. The youth channel was forced into the move after the state broadcaster’s budget was cut and the channel’s ratings dropped.

What was expected to be a disaster, though, was seen as an opportunity – without the restriction of having to service linear TV, the whole thinking behind its output changed.

The network now spends 20% of its $50m budget on content that isn’t “long-form TV” including short videos, written articles, animation and native content for Facebook, Snapchat and Twitter. Some 18 months on, BBC Three has seen its share of catch-up viewing double and its original drama, Thirteen, was last year’s most requested show on the BBC’s iPlayer catch-up service. It provides a tantalising peek into the future for Australian marketers, viewers and content creators.

“A half hour or hour programme represents a uniformity, but that’s not the world we live in anymore,” says Tom Hoffman, the VP for digital and social media at Fremantle. “You’re already seeing this in podcasts. The best content just dictates its duration. But we can also use data to guide us, too.”

Fremantle creates and distributes some of the world’s top-rated shows including The X-Factor, America’s Got Talent and Family Feud. But they are shows that, on the surface, seem ill-equipped for a digital future because they seemingly thrive on a whole family watching together; something that seems at odds with fragmented viewing habits. The company though was able to use data insights, including from ad tech platforms, to adapt its approach.

“Our talent programs are more niche than they might seem,” he adds. “Variety shows are a variety of niches. Also, while at first we used to think about how a format would travel to other countries, now we consider how they will adapt to different digital platforms. Perhaps there is a segment of a show that suits an online platform with a shorter attention span? The winner of America’s Got Talent was a 12-year-old singing ventriloquist, and the clip of her first audition was Fremantle’s top-rated clip on Facebook and YouTube. But on Twitter, it was a deaf singer. Meanwhile, our biggest clip on Instagram was a video of food.”

It’s a sentiment that applies to marketers as much as program-makers, as Klosowski, the VP of SpotX’s Advanced Solutions Group, emphasises: “The idea of what TV is will change. Mobile, desktop and traditional TV will merge. Brands and agencies will look at how to reach their audience and plan across all of these devices as if they have equal value. The future is using data to get to the audience of their choice.”

And don’t think the future is just catch-up, too. Live TV remains popular and as more televisions become connected, streaming live via the internet will become the norm. “A Silicon Valley giant can capture a million sets of eyeballs but not at the exact same second like you can with TV,” points out Hoffman.

He cites the example of James Corden’s success in the US. His apparently meagre ratings (around 1 million live) on his 12:30am chat show have translated into online clips that reach up to 170 million views. But live TV was still the springboard. “Nothing markets digital better than television,” he adds.

You might wonder, therefore, why we’re only just seeing addressable advertising go live in Australia with Seven’s announcement. After all, catch-up formats have been in existence for well over a decade. Hulu – the US pioneer – launched in 2005 through a collaboration between News Corp and NBC Universal while the UK’s BBC iPlayer first went into beta testing in 2007. In Australia, Seven threw down the gauntlet in 2010 before Nine and Ten joined in a couple of years later. In terms of mobile, 4G was launched by Telstra back in 2011 and provides speeds quick enough to load a typical video in just three seconds.

Content is changing, but can ad tech cope?

The reality is that many ad serving platforms are simply not equipped to deal with streaming, or at least to do it justice. If you’ve ever encountered a lengthy delay before your video loads, or had your mobile screen black out, chances are it was caused by the adtech and not your device or internet service provider.

The problems arise because traditional ad serving platforms use a “waterfall” system to select which advertiser gets to buy the slots programmatically. Simply put, publishers offer an ad slot to the sales channel they think will offer the most money but, if they don’t bite, it gets offered to apparently less valuable bidders until somebody purchases. Of course, if choice one, two, three and so on don’t work out, you’ll be waiting quite a time for the rest to get in line. Moreover, it can also be the case that those bidders lower down are actually willing to pay more money than the supposed top choices.

“The tech can’t search the options quick enough,” explains Klosowski. “If each potential buyer is given half a second to make up its mind, but ten of them say no, then you’ve got a five-second delay.”

This pause is mostly irrelevant on a standard webpage because it doesn’t delay content, but for a broadcaster it causes all manner of issues. For instance, what if the second brand is actually more valuable than the first? What if it’s a premium car manufacturer, say, that is a better fit for the program, and that marque is willing to spend more money than option one?

It was exactly these delays that inspired a new generation of ad serving platforms dedicated to video. One of the first was SpotX, which was founded in 2007 by Steve Swoboda and Michael Shehan as an offshoot of their paid search optimisation service Booyah.

“Our system of trading is completely parallel,” Klosowski adds. “Every buyer sees every opportunity at the same time – meaning a bigger yield for the publisher and less latency. The entire process takes less than half a second.”

Even if a video isn’t delayed, there’s still a world of potential problems that can be encountered.

With one-size-fits-all programmatic trading, there’s the risk of unsuitable adverts appearing during programs. Of course, this could be as dramatic as an undesirable advertiser popping up, or it could be having multiple spots from similar businesses next to one another.

“Publishers want to be in control of adverts,” he adds. “The media owner is not earning maximum value for their inventory if they’re choosing convenience by selling ad slots via a third party. We want to make it easy for them to sell their own inventory. But also, premium broadcasters have their own sales force. We don’t want to compete with them.”

The data opportunity

Already, we’re seeing channels increase their efforts to collect data on their customers to facilitate this new future. Since February 2016, Nine has asked its viewers to register for its 9Now catch-up service and already claims to have 4.5m registered users, while in June last year, Seven signed a new deal to launch a standalone video service. Meanwhile, Foxtel has reportedly agreed its own deal to join them.

Of course, data is key to these new services. New ad serving platforms differ from traditional services because they allow broadcasters and advertisers to combine information anonymously, with the platforms then throwing in extra third-party data. The result is the perks of more targeted advertising without the threat of handing over lucrative customer information to competitors.

With such a huge audience, why aren’t some broadcasters and advertisers taking advantage and transferring to new ad-serving tech? “For some, there’s a perception that it’s just not TV,” admits Klosowski. “It’s still TV even if it’s not delivered via an antenna or cable package. But some digital buyers still don’t understand the TV side yet and the TV guys don’t grasp the digital side yet.

“Banner advertising got established over a long time in the 90s but then the internet became dynamic; television is a long-time fixed platform that takes standardised ad units. The internet is struggling to find uniformity, and it gets disrupted every year with the next platform winner.”

If Australia’s industry is burying its head in the sand, then marketers will need to act quick as technology continues to offer new experiences.

We’re already seeing similar initiatives in Australia with Optus offering packages where you can stream Netflix, Stan and Premier League football without it counting against your data allowance. It seems only a matter of time before everyone has no data restrictions. “If you get unlimited service, the opportunities to watch will increase,” points out OzTam’s Doug Peiffer. “Speeds will quicken, and uptake will increase.”

But what of the distant future? Will viewers be able to actually be in programs? And what marketing opportunities could that bring?

We’re not as far off as you might imagine.

“Fremantle makes a show in Norway called Lost in Time,” adds Hoffman. “We wondered, ‘How do you do virtual reality for TV?’ So now the people in the show use VR.” The viewers see them in the world that they see. While the contestants are transported to the Ice Age, Wild West and Jurassic period, viewers can play along at home in real time using a smartphone or tablet. It’s a blend of cutting edge technology, connected devices and an old-fashioned gameshow format.

Or as Hoffman puts it: “Technology keeps advancing but traditional television can sit right in.”

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